COVID-19 as a \u3ci\u3eForce Majeure\u3c/i\u3e in Corporate Transactions

This paper surveys the use of pandemic-related provisions in Material Adverse Effects ( MAE ) provisions in a large data set of publicly disclosed M&A transactions spanning the years 2003-2020. We document a trend towards greater use of such provisions, taking off particularly after the H1N1 crisis in 2009, and spiking again in late 2019 and early 2020. These terms are invariably located in the exclusions/carve-outs to the MAE, and they are overwhelmingly accompanied by disproportionate effects language that tends to dampen the effect of the carve out. There is little discernible statistical relationship between the inclusion of a pandemic-related carve-out and the inclusion of a reverse termination fee ( RTF ) granting optionality to the buyer; but when an RTF is present, its magnitude tends to be smaller in the absence of any pandemic-specific carve-out, suggesting some degree of observational complementarity between these terms